General and specialized terms in the field of digital currencies are somewhat misleading to newcomers to the field. One of the most common of these is the misunderstanding of the Blockchain, bitcoin, and the differences between them. Are these two concepts both the same? What is the difference between the two and in what ways are they similar? By reading this article, you will get the answers to these questions.
Some people refer to bitcoin when they want to talk about blockchain technology. Others generally refer to the Blockchain when talking about digital currencies. However, these two words cannot be used interchangeably; Because both refer to different but related concepts. Therefore, understanding the difference between the two concepts is very important for beginners.
In this article, we want to explain the general concepts of the Blockchain, bitcoin, digital currencies and the differences between them in very simple language.
A very simple comparison
Blockchain is a technology that was first used in Bitcoin and the Bitcoin network uses it to achieve its main goal of decentralization.
In fact, Blockchain is a technology for the permanent storage of information that decentralized digital currencies, such as Bitcoin, use to authenticate transactions in a decentralized manner. This technology can have other applications besides digital currency.
To understand the difference between Bitcoin and the Blockchain, we can use very simple similes. We do not have to go far; All of you use the Internet every day (and even now) and have a relative knowledge about it; Let’s start with the Internet:
- The Internet is a special technology for sharing information.
- Search engines are one of the most popular and well-known ways to use Internet technology.
- Google’s website is one of the most famous and oldest search engines.
as the same way:
- Blockchain is a special technology that is used to record information in a decentralized manner.
- Digital currencies are one of the most popular and well-known ways to use Blockchain technology.
- Bitcoin, in turn, is the first and most well-known example of a digital currency.
It is true that many Internet users today meet all their Internet needs through Google; But we never confuse Google with the Internet and use them interchangeably. So, although Bitcoin is the first and most popular example of Blockchain technology, the two should not be confused.
The general concept of the Blockchaink
Most blockchains are designed as a distributed, decentralized digital general ledger. Simply put, Blockchain is a digital general ledger that is an electronic version of a paper general ledger and is responsible for recording a list of transactions. To better understand this concept, it is necessary to first deal with the concepts of “General Office»،«Decentralized” And “DistributedLet’s get to know more. In the following, we will briefly explain each of these concepts.
If you have ever read a book, you are familiar with the concept of a general ledger. An accounting ledger is a ledger in which all transactions of a company or economic entity, together with debtor and creditor accounts, are recorded and stored. But the special feature that distinguishes the general ledger from ordinary notebooks is the special connection of its pages with each other. As you can see in the image below, at the bottom of each page of the general ledger is the phrase “move to page 2” and at the top of each page is the phrase “move from page 2”.
After completing each page, the sum of all accounts on this page will be written in the “Transfer to Page 2” section and transferred to the next page. Also, at the beginning of each page, the total accounts of the previous page are written in the “Movable from page 2” section. In this way, all the pages of the general ledger are connected to each other in a chain and the information is recorded permanently.
When we talk about the Blockchain as a general ledger, we mean a digital database for storing and storing information, permanently and invariably. More precisely, a blockchain is a linear chain consisting of several blocks that are connected to each other and secured through cryptographic methods. Each block in the Blockchain can be thought of as a page from the general ledger. Block cryptography is similar to the mechanism that links the pages of a general ledger together. Of course, cryptographic methods in the Blockchain are much more complex and secure than traditional notebooks.
The term decentralized refers to how the general office is managed. To understand the difference between a blockchain and traditional, centralized ledgers, consider the common forms of centralized ledgers, such as general records of home sales, records of a bank withdrawing money from an ATM, and an eBay checklist. In each of these cases, an organization controls the head office; A government agency, a bank, or a store like eBay.
The problem with centralized general ledgers is that they are changeable and can be easily manipulated by a central entity; Because the decision-making power for the network and all the information recorded in it is the prerogative of a particular entity. In contrast, decentralized head office (of which Blockchainchain technology is a special kind) is indestructible and immutable; Because in this system, decision-making power is in the hands of all members of the network (and not a specific person or entity); Therefore, there will be no central power in it.
Distribution is a concept that describes the structure of a general ledger. In distributed systems, instead of storing information on a specific server or database, this information is disseminated to all participating members of the network. In the previous examples (traditional general ledgers), there was only one original copy of the general ledger available to a government agency, bank, or a specific store. Other copies of the general ledger are merely a backup copy that has no formality.
In contrast, Blockchain technology acts as a distributed general ledger; This means that there is no single copy of the general ledger, and any user who decides to join and maintain the Blockchain network will receive an electronic copy of Blockchain data that is regularly updated with the latest transactions, along with other users. And will have it at the same time. In such cases, even if one of the databases is hacked or disabled, the information stored on the blockchain cannot be changed or deleted.
Blockchain; A decentralized and distributed head office
Blockchain networks are distributed, decentralized general ledgers that are secured using cryptographic technology through the collective participation of many users scattered around the world. These users are also known as “nodes” who participate in the process of verifying and validating transactions.
Blockchain technology may be used in other activities that do not necessarily require financial operations, but in the field of digital currencies, Blockchain is responsible for maintaining and maintaining a permanent archive of all approved transactions.
How Blockchaink Works
The term blockchain is derived from the way documents are organized in this system; A chain of interconnected blocks that contain data and documents.
Quite simply, a block in a blockchain is a packet of data that contains a list of information about recent transactions (among others); Just like a shopping list printed on paper.
But the special feature of the blockchain is that the blocks are not changeable (like putting each page of printed paper in a sealed box). As new blocks are added to the Blockchain, a continuous record is made up of interrelated blocks (such as a physical general ledger and its multiple pages that hold records). What we have said so far was a very simple analogy, but the real process of the Blockchaink is much more complex.
One of the most important reasons for Blockchain to resist changing, deleting, or modifying recorded data is that blocks are interconnected and secured using an encryption mechanism. This means that an encrypted output is generated from the data in each block and stored in the next block (something similar to the mechanism used in accounting ledgers).
According to the encryption mechanism, each new block is linked to its previous block because the encrypted output of the previous block is recorded in this block. The beauty of this arrangement is that as each new block is added to the blockchain, it becomes virtually impossible to change its data, because the blocks are secured with cryptography, and it is very costly and difficult to break cryptography and rules.
So in a nutshell, a blockchain is a chain of interconnected data blocks that are organized in chronological order and secured with cryptographic proofs.
Also read: How does the Blockchain work?
The general concept of digital currencies
Simply put, digital currency is a digital form of money that is used as a trading tool in a distributed network of users. Unlike traditional banking systems, these transactions are monitored through a digital general ledger (blockchain) and are done directly (directly) between users.
Words “Crypto»In the phrase«CryptocurrencyRefers to the cryptographic methods used to secure the economic system of digital currencies. Cryptographic algorithms are also used to control the speed of transaction validation and the rate of supply of coins in the network.
Bitcoin is the first and naturally most popular digital currency introduced to the world in 2009 by developer alias Satoshi Nakamoto. The main purpose of making Bitcoin was to create a decentralized and independent electronic payment system whose security was established using mathematical solutions and cryptographic methods.
Although Bitcoin is the most well-known digital currency, it is not alone in this area. There are other digital currencies today, each with its own characteristics and rules. In addition, we need to know that not all digital currencies have their own blockchain. Some of them are built on existing china blocks and others have developed their own china blocks completely from scratch.
Bitcoin, like most digital currencies, has a limited supply. This means that once the maximum supply is reached, the system will not generate any other bitcoins. The maximum supply of bitcoins is 21 million units, which varies in different digital currencies. Usually the total number of units of a digital currency is one of the basic information that is published in the development stages.
The Bitcoin protocol is open source and anyone can retrieve or copy its code. Many developers around the world are currently involved in the development of this project.
Blockchain is a technology for recording information without the possibility of alteration and manipulation and was first used in Bitcoin. Digital currencies use blockchain to ensure the security and accuracy of network transactions without the need for an intermediary or central organization. This technology can be used in other fields as well.
This article tries to explain as simply as possible to understand the difference between bitcoin and blockchain without the need for prerequisites. However, for more information, we suggest you read various other articles about Bitcoin and the Blockchain.